Long-Dated Treasurys are Real Opportunity: KLS Exec
It's been a big week on Wall Street with the S&P at a two year high, GOP victory in the midterm elections and the Fed's action on quantitative easing (QE2).
"The market hasn't fought the Fed and the fixed-income markets, either, and the government markets, so the belly of curve, which is where the Fed is focused at the moment, has rallied pretty significantly," Jeffrey Kronthal, co-managing partner and co-CIO of KLS Diversified Asset Management, told CNBC's "The Strategy Session" on Friday.
"The orphan child is the 30-year bond, the spread between 10s and 30s has widened pretty dramatically—widened into the announcement and has probably widened 15-to-20 basis points post the announcement," Kronthal said.
"We look at long-dated Treasury strips as a real market opportunity. The long-dated ones yield around 450, they have positive convexity—meaning they get longer as the market rallies, and shorter as the market trades off," he said.
"We really think they are, in most scenarios, gonna outperform the rest of the fixed-income market," Kronthal concluded.